What matters right now in business. From WSJ reporters around the world.

The Toyota Recall: Big Rewards Come With Big Risks

Toyota’s latest recall, involving 6.39 million vehicles worldwide, highlights how finely balanced the risks and rewards are in the global auto industry as it modernizes its industrial processes.

The industry’s move toward an increasingly modular method of making cars – sharing more and more components across different models – has proved a successful way for mass-market auto makers to scale up and simplify manufacturing in a notoriously capital intensive industry.

It has required simplifying the supply chain too, relying on fewer, bigger suppliers.

Cars made on standardized platforms like Volkswagen’s MQB, a particularly flexible platform that will underpin more than 40 small to midsize cars made by the German auto maker in the years ahead, are expected to generate nearly 90% of industry growth through 2018, according to management consultancy AlixPartners.

The consequence is that if things do go wrong, auto makers can have a hard time containing them.

Toyota said Wednesday the recall reflects safety concerns with an array of equipment used on several different models affecting millions of vehicles on the roads across the globe.

The spiral-cable assembly attached to air bags alone affects 3.5 million vehicles world-wide, including 1.67 million in North America.

The seat-rail problem affects 2.32 million vehicles globally, including 670,000 vehicles in North America.

Models subject to the recalls include RAV4 and Highlander sports utility vehicles, the Corolla sedan, and Yaris compact car

Toyota’s recall isn’t as large as the 7.4-million strong recall it undertook in 2012 but it comes as massive, multi-country recalls are recurring for the big players. Ford ended up recalling 16 million vehicles for a cruise-control switch problem in eight separate recalls ending in 2009. This year, GM has recalled 2.6 million cars because of faulty ignition switches in Chevrolet Cobalts. GM has separately recalled 1.5 million vehicles worldwide to fix steering-system problems.

As GM and Toyota have discovered, the consequences of recalling cars on this scale goes far beyond the immediate impact on consumers and the brand . As U.S. law-makers scrutinize what went wrong over the ignition-switch problem at GM, the U.S. Justice Department last month slapped a $1.2 billion criminal penalty on Toyota for misleading consumers about safety problems on its cars.

Comments (5 of 5)

Although my 2007 RAV4 is eligible for the air bag wiring issue, entering my VIN on the Toyota website returns "no open recalls for this car." I reviewed my CARFAX vehicle history, and no service visits were recorded at a dealership by the former owner for this issue. BUT THAT'S THE LEAST OF MY TOYOTA CONCERNS!. After I had researched, then purchased my 2007 RAV4, I discovered upon further "deep research" that the engine is one of many models and years affected by failures in the ring and piston design, causing huge oil consumption. After purchasing my RAV on the basis of "Toyota Reliability" I was SHOCKED!!! Now I have a big headache to deal with, and as a poor man, this will hurt my finances bigtime. And low and behold...a class action lawsuit was filed in California against Toyota for this very issue of defective engines. All this is staggering to me. I have gone from being a big Toyota fan...TO TOYOTA'S WORST ENEMY. I will not rest until I spread as much negative publicity around Oregon as I can. For Toyota's engine problem, and what I may have to spend, I VOW I will prevent 10 sales of Toyota cars in Oregon!!!!!!!!!! Do you hear me Toyota???

10:05 am April 10, 2014

Beankountr wrote:

I have a 2012 Toyota RAV4 Limited. Toyota still has not fixed the acceleration problem. It has not caused an accident but it's scarry when the car wants to accelerate as you slow down for a traffic light. Of course, Toyota Service cannot get the car to demonstrate the problem when they've had it in their Service Department.

2:04 pm April 9, 2014

Weibullguy wrote:

Modular design and manufacturing is a significant money saver. Unfortunately, as you point out, this exposes the manufacturer to common cause failure modes where the extent of condition may cut across several product lines. Even more of a concern is common cause failure modes across manufacturers. As the supply chain continues to consolidate in response to the modularization, there will be fewer makes and models of components to select from increasing the likelihood that manufacturer A and manufacturer B will use the same component from supplier C. A problem with supplier C now affects manufacturer A's products and manufacturer B's products. In a competitive industry, manufacturer A and manufacturer B aren't going to share design information leaving it up to a third party to ascertain extent of condition. As we've seen in the GM ignition switch case, the third party (NHSTA) also failed to identify a potential safety issue when reviewing the technical service bulletin that GM issued on the ignition switch in 2005/2006. Of course, if another automaker was using the same ignition switch, NHSTA would need the design basis documentation from that other automaker to "connect the dots" and I don't believe automakers are required to docket this information with the NHSTA.